Consumer surplus is defined as the difference between the consumers' willingness to pay for a commodity and the actual price paid by them, or the equilibrium price.
Consumer surplus is based on the economic theory of marginal utility, which is the additional satisfaction a consumer gains from one more unit of a good or service. The utility a good or service provides varies from individual to individual based on their personal preference. Typically, the more of a good or service that consumers have, the less they're willing to spend for more of it, due to the diminishing marginal utility or additional benefit they receive.
Producers often take advantage of consumer surplus when setting prices
If a business can identify groups of consumers within their market who are willing and able to pay different prices for the same products, then sellers use price discrimination – this is a way of turning consumer surplus into producer surplus, put simply to make higher revenues and profits.
